For industrial and commercial power consumers, generally electricity prices are based on two elements: actual usage and a penalty based on the highest point of demand (or peak) within a billing period (weekly, monthly or annually). Demand is calculated using demand intervals, a short timeframe (often 15 minutes) during which overall usage is aggregated and tracked as a total. The average calculated is the kW demand for this period. Peak shaving is the ability to control the usage of power from a power supplier during intervals of high demand, in order to limit or reduce demand penalties for the billing period.
There are two possible approaches to peak shaving: reducing usage through load shedding and adding capacity with on-site generation. One example of adding capacity with on-site generation is through the use of a stationary battery that is charged during periods of low energy demand and discharged to the power consumer during periods of peak demand. Using a stationary battery in this way does not change a power consumer's actual usage but does decrease the highest point of demand and therefore the penalty owed by the power consumer.